Recipients of Paycheck Protection Program Loans

Margie Swoyer NPA News

This week, the Small Business Administration (SBA) extended to May 14, 2020–next Thursday–the deadline for some recipients of Paycheck Protection Program (PPP) loans to return funds they received and have chosen not to use for any reason. PPP funds returned by the May 14th deadline will qualify as a “good faith certification” and relieve the recipient of the risk of SBA and DOJ investigations and potential civil or criminal liability if it is determined that the recipient’s original application did not certify accurately the need for the PPP funds.

This option became effective April 23, 2020 when the SBA issued “Frequently Asked Questions (FAQ) No. 31” stating that

…all borrowers must assess their economic need for a PPP loan under the standard established by the CARES Act and the PPP regulations at the time of the loan application. … borrowers still must certify in good faith that their PPP loan request is necessary. Specifically, before submitting a PPP loan application, all borrowers should review carefully the required certification that “[c]urrent economic uncertainty makes the loan request necessary to support the ongoing operations of the Applicant.” Borrowers must make this certification in good faith, taking into account their current business activity and their ability to access other sources of liquidity sufficient to support their ongoing obligations in a manner that is not significantly detrimental to the business.

News of PPP loans received by large, publicly traded companies such as Shake Shack and AutoNation, and the Los Angeles’ Lakers reached the SBA. As a result, the SBA announced this new rule explaining that recipients of PPP funding prior to the issuance of FAQ No. 31 that repay the loan in full by the deadline (now May 14, 2020) “will be deemed by the SBA to have made the required certification in good faith.” In other words, no SBA or DOJ investigation of the truthfulness or need of the original application will follow.

By no means are we implying that pawnbrokers who applied for PPP loans failed to make “good faith certifications” of their need for these funds. We are merely making every effort to keep everyone up to date on all things regarding PPP and EIDL, and related funding issues. \

If you are unsure the certification of need you made on your PPP application submitted between April 3 and April 23, 2020 meets the test – current economic uncertainty makes the loan request necessary to support the ongoing operations of the applicant – we urge you to call your local lawyer and accountant to assess if and how to return the PPP funds to the lender that processed your application by May 14, 2020.

The SBA announced it would provide additional guidance on this loan-return opportunity, but as of late yesterday, nothing further was released. Team GRC will continue to follow the SBA’s statements and published guidance in order to provide you with updates.


This GRC Update is not intended and should not be construed as legal advice to NPA members.
Members should consult their own lawyers for legal advice.
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